Global equity markets had a strong quarter resulting in some markets exceeding their prior peak, such as the U.S. All sectors were positive in the quarter except real estate. Fixed income markets were mixed during the quarter, with positive performance from high yield, and emerging market debt, while core fixed income was slightly negative.
The beginning of 2024 continued the positive momentum from 2023, with equities having their best start since 2019. Large-cap stocks (S&P 500 Index) were up +10.56% in the quarter, and small-cap stocks (Russell 2000 Index) were up +5.18%. International developed stocks (MSCI EAFE Index) were up +5.78% for the quarter, and emerging market equities (MSCI EM Index) were up +2.37% for the quarter, impacted by negative performance of the Chinese market.
Fixed-income returns were mixed during the quarter. The U.S. 10-year Treasury yield increased by 25 bps in the quarter to 4.20%. First quarter performance for the Barclays Government Credit Index, a proxy for the broad U.S. fixed-income market, was down -0.72% in the quarter; high-yield bonds was up +1.47% in the quarter; and emerging market debt was up +1.40%.
The Stable Value Fund continues to be a positive performer, with returns up +0.52% for the quarter.
The Bond Fund was down -0.69% for the quarter, as interest rates increased especially in longer maturities impacted by Federal Reserve (Fed) action.
The Sustainable Balanced Fund, which has allocations to both sustainability-focused equity and fixed-income managers, was up +3.68% for the quarter. Underlying managers specialize in Environment, Social, and Governance (ESG) leaders.
The Target Annuitization Date (TAD) Funds, which have allocations to the Bond Fund as well as to the Equity Fund (and in a few of the TAD Funds, the Stable Value Fund), had performance between +2.03% and +6.05% for the quarter.
The Equity Fund was up +7.57% for the quarter. The U.S. and specifically large capitalization stocks led the market.
The Global Sustainability Index Fund (GSIF) was also very positive, with a return of +9.49% for the quarter.
The Basic Annuity essentially has been protected from interest rate volatilities since 2016, with the addition of sophisticated risk and monitoring tools and the hiring of a new manager, Voya. As a result, the funded status (our assets to the present future value of all our promises to annuitants) improved in 2023. There was a 3.5% increase given beginning in 2024.
In the Participating Annuity, the funded status (our assets compared to our future promises to our annuitants) improved in 2023 and again in early 2024. Given the improvement, there was a 5% increase beginning in 2024.
Healthy increases were also instituted for the pre-2007 Equity and Balanced Benefit Annuities based on 2023 performance.
As a retirement investor, you should focus always on the appropriate asset allocation, or mix among stocks, bonds, and cash/stable value investments, and your long-term retirement objectives. It is rarely wise to react to shorter-term market movements. The easiest way to avoid that is to invest in the Target Annuitization (TAD) Fund nearest to your retirement date. As of January 1, 2021, there are now two new TAD Funds (2045 and 2050) available. Again, these funds are more focused on growth early in your career, and become more conservative as retirement approaches, by owning fewer equities and more bonds and stable value investments.
Our capable and responsive Member Services staff is available to assist you. Please contact the Pension Boards at 1.800.642.6543 with questions about fund information, performance, strategy, and approach.